BUCHANAN AG. OPTION PREMIUM PROGRAM

Managed Futures

Buchanan and Company, Inc. is pleased to announce the addition of Managed Futures to our line of customer services. Our Managed Futures division, led by Pete Loewen, will serve investors seeking professional money management and/or an avenue to hedge against volatile stock or bond portfolios by diversifying into commodity futures. The term, Managed Futures refers to an individual managed futures account traded by an independent registered Commodity Trading Advisor (CTA).

Objective

Commodity Options are recognized as one of the most versatile investment tools available. The Buchanan Ag. Option Premium Program was developed as a means of capitalizing on the profit potential associated with collecting option premiums by selling (writing) out-of-the-money options on agricultural futures contracts. Time value of an option is a wasting asset. An overwhelming majority of out-of-the-money agricultural trade options expire worthless and the seller (writer) of the option retains the premium. This managed account program will attempt to take advantage of the opportunities created by speculators and hedgers that purchase put and call options in the agricultural options market looking for risk protection.

Strategy

Anticipating futures price movement is critical to any futures trader. But the primary focus of this program is predicting price areas where agricultural futures markets are not likely to move. This allows the account manager to sell out-of-the-money options at those strike prices where the futures market is unlikely to move, capture the premium and minimize the risk for the account.

To assess long-term market direction, the program uses both fundamental and technical analysis. Fundamental analysis uses anticipated changes in supply and demand to predict future price movement. Technical analysis is based on the theory that historical price movement provides a means of anticipating futures market price direction..

Account Management

• The number of positions in place at any one time is strictly limited in order to manage risk.
• The amount of equity at risk will also be limited by the use of stop-loss orders.
• Only out-of-the-money options are sold, and then only in markets where buyers are willing to pay a significant premium for ownership of the option. Because out-of-the-money options have no intrinsic value, their value normally declines over time.
• This program takes advantage of any large decline in the value of the option (profit for the seller) by offsetting the position and taking the profit, rather than holding the position to expiration and risking an adverse market move.
• This program focuses solely on the selling (writing) of agricultural trade options and will not write options on non-agricultural futures contracts.

For Further Information--

Entry into this managed account program is based solely on your obtaining and reading a complete prospectus. To obtain a prospectus, contact Pete Loewen at 784-776-1313 or 1-800-688-2512 or buchanan@flinthills.com.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. In considering whether to trade or to authorize someone to trade for you, you should be aware of the following: The profit potential for the seller (writer) of an option is limited to the amount of premium received, while the risk of loss is unlimited.